Corby, Crawley and Croydon are bidding to join Cambridge as university towns, it was announced yesterday. Basildon, Basingstoke, Dudley and Stockport are also among 27 areas in England bidding for funding to launch new higher education (HE) centres, said the universities secretary John Denham. They are among the first places to apply to take part in the government's "university challenge" initiative, launched in March.

Denham said the project would help regions hit by the recession by providing education and regeneration in rural areas as well as cities. Opposition MPs accused the government of "knocking up" the idea to compensate areas which had been earmarked for casinos but missed out after the project was scaled back at the beginning of the year.

Partnerships of regional development agencies, local authorities and colleges have put together bids for the universities centres, which will teach a range of degrees but fall short of being standalone universities because they will not have their own degree-awarding powers or privy council approval.

Universities in neighbouring areas will be a crucial element in the partnerships accrediting the degrees. The government wants 20 new higher education centres planned within the next six years. The new centres could provide study places for up to 10,000 students.

Ministers want the centres to open up the chance to study for a degree for people who would not have given much thought to a degree previously. According to economists, every extra job a university creates is matched by another elsewhere in the economy, such as in restaurants and bars, to cater for the student population.

But Martin Freedman, head of pay, conditions and pensions at the Association of Teachers and Lecturers, said: "Some of the 27 towns interested in setting up higher education centres already have successful further education colleges. We don't want these colleges and new universities to compete for students at each other's expense.

"In the light of the government's cap on the number of extra HE students, this proposed university expansion raises questions about how additional universities can function if limits are placed on the number of students?"

Universities are already struggling to fill their places after ministers were forced to cut the numbers funded to go to higher education next year. Last month, Denham froze additional student numbers after admitting the government had botched its estimates for student grants and could no longer afford its support package.